Takata CEO called to explain air bag crisis to Japan's industry ministry

TOKYO: Japan’s powerful industry ministry has summoned Shigehisa Takada, chairman and CEO of Takata Corp, to explain what the company is doing to resolve a crisis over potentially deadly air bags, two people with knowledge of the matter told Reuters.

Takada, 48, the third-generation head of the Tokyo-based auto safety equipment maker, is expected to attend talks at the Ministry of Economy, Trade and Industry (METI) with senior officials, including director-general Atsuo Kuroda, as early as Monday afternoon, one of the knowledgeable people said.

It’s not clear what specific information the ministry is seeking to gain. Kuroda heads the ministry’s manufacturing industries bureau.

More than 16 million vehicles have been recalled worldwide since 2008 to replace Takata air bag inflators, which can explode with too much force and shoot metal fragments into the car. At least five deaths have been linked to the defect, all in Honda Motor Co cars.

Another Takata executive is due to appear before a second U.S. congressional hearing later on Wednesday to explain how its air bags become potentially lethal. A first hearing took place on Nov. 21.

Takada last appeared publicly at a closed-to-the-media shareholders’ meeting nearly six months ago, where he apologised for the air bag problems. In a statement issued on Tuesday, he acknowledged the company “can and must do more.”

Takata spokesman Toyohiro Hishikawa said he was not immediately able to confirm whether Takada had been called in by the ministry. A METI spokesman said he had no immediate comment.

RENESAS RESCUE MODEL

Officials from METI’s automotive division have had multiple meetings with representatives from Takata in recent weeks as the air bag crisis has escalated, said the knowledgeable people, who didn’t want to be named due to the sensitivity of the subject.

Business associates who have met Takada recently have told Reuters he said Takata had identified and fixed the main cause of the air bag defect, which he said was mainly a flawed manufacturing process.

If that cause is limited to certain timeframes and specific production plants, as Takada told those people, the current crisis could be resolved once Takata conducts the necessary recalls as thoroughly and quickly as possible, one of the people said.

“While mindful of the lives lost and other people injured in Takata-related accidents, we don’t see this as a case that would affect Japan’s industrial brand,” the person said. “We don’t think this has that kind of magnitude … as far as we could tell now.”

That could change if a more fundamental shortcoming, such as a design flaw rather than a manufacturing issue, was found to be at the root of the defects, or if there’s a significant expansion in the scale of car recalls. That could then stretch Takata, the two individuals said, though METI officials believe Takata could survive a wider recall financially.

“Takata is a cash rich company,” one of the people said.

And, in a worst-case scenario of Takata facing the threat of insolvency over expanded recall and potential legal costs, METI, Japan’s key industrial policymaker, would be unlikely to take a lead in any bail-out, the person said.

“Those days when METI acted as a proactive, hands-on industrial policymaker are over. That’s up to the industry first,” the person said. “If automakers felt Takata’s technology is essential to their business and wanted to keep the company and its technologies in Japan, they would need to take the lead.”

But the ministry could help in such a process, as it did a couple of years ago with Renesas Electronics, a chipmaker rescued via a joint industry- and government-led scheme.

“Our concern is more on U.S.-Japan relations: we want to make sure this doesn’t affect the two country’s relations and we want to make sure this is not a case of Japan-bashing. We think it’s not, today,” the person said. (Reuters)